Shoulds Versus Coulds

May 30th, 2011 at 11:36 am

As I wrote the other day, it’s essential to turn the conversation back to what we should be doing on the jobs front, so I was glad to see Paul Krugman thinking along those lines this AM. But I was struck by this ‘graf:

“For example, we could have W.P.A.-type programs putting the unemployed to work doing useful things like repairing roads — which would also, by raising incomes, make it easier for households to pay down debt. We could have a serious program of mortgage modification, reducing the debts of troubled homeowners.”

Especially re the WPA-idea, this got me thinking about the relative value of important voices like Paul’s promoting what we should do right now as opposed to what, given political constraints, we could do.

And I think now is a good time to emphasize the latter.

Let me be clear. I totally agree that we mustn’t let “political realism” shut down our thinking on the best way out of this mess. And while that kind of writing sometimes feels academic to me, if done well (as Paul does it), it can slowly but persistently set the stage for actually doing the right thing when the political landscape shifts. Shift it will, and at that time, Paul will be among those who built the “new” paradigm from which economic policy will flow (“” around ‘new’ because most of this is known since Keynes).

I know—sounds like wishful thinking (well, for some…for others, sounds like their worst nightmare)…but I bet I’m right.

But then there’s this: There will be no WPA-type programs in our near future. There was no appetite for them in the Obama admin in the midst of the worst recession since the Great Depression and there’s a lot less now. The reasons for that are interesting and I’ll speak to them another day. But it ain’t happening.

And please don’t accuse me of “negotiating with myself” here. I stressed above the importance of making those arguments, and I frequently made them myself as a member of the President’s economics team.

It’s also congenitally hard for politicians to get behind “a serious program of mortgage modification.” Those who advocate for this (the NYT editorial page, e.g.) are right, but they’re also downplaying a very binding constraint. The politics of this idea are deeply wound up in moral hazard. People forget, but it was precisely this action—giving mortgage relief to someone at risk of default and not to someone who was struggling to keep up their payments—that birthed the Tea Party.

Yes, it’s true that leaders must stand up to such views and do what’s right for the economy…damn the torpedoes and all that. But those of us espousing such actions must respect, or at least acknowledge, that those torpedoes are not pointed at us. They’re pointed at politicians who take them seriously and thus we need also need to espouse plans b, c, d and so on. (In this space, for example, there are ways outside of federal legislation to encourage principal write-downs—more to come on this in later posts.)

You might say that with the likes of Cantor and Ryan is ascendance, there’s no point in even contemplating “coulds.” I think that’s too easy and the stakes are far too high for it.

This is not a critique of Paul. As I said in my initial post, there’s no more important voice in the debate I’m trying to amplify than that of Paul Krugman. He’s one of the few writers I miss when he goes on vacation.

[Don’t you get a little bummed out when you open the paper on a Krugman day and he’s not there, or when he says he won’t be adding to his blog for a few days because of travel? What’s more, I could be wrong, but seems to me that when Paul is away, the Very Serious People he worries about say crazier stuff. It’s as if up on Capitol Hill, they’re going, “Krugman’s on vacation! It’s the perfect time to launch our bill to do away with social insurance once and for all!! Mwahahaha!!!”]

But here’s a challenge for Paul. I know he’ll keep writing “should” columns and that’s crucial for a better future. But for a better “now,” I’d like to see a column—maybe a few columns—called “What We Could Do.” He’s done a lot of this before—I don’t want to imply he’s divorced from the “now”—but this would be a good time for him, along with the rest of us interested in trying to make some desperately needed lemonade from some terribly sour lemons, to turn aggressively from should to could.

55 comments in reply to "Shoulds Versus Coulds"

When the crisis first hit and word of a stimulus package first became public, I thought, “Maybe there is hope that we can turn some of these broken eggs into an omelette.” We had thousands (millions?) of unemployed citizens with skills fairly well aligned with tasks this country needs to get done: repair bridges, fix our water and electrical systems, fix transit, and infrastructure, and apparently hundreds of billions to spend on it. It would get money into the hands of debt-stricken Americans, boost demand for consumer goods, and, if done right, boost future growth and revenues in a way to take quite a bit of sting out of the price tag. Instead we got tax cuts and a call to dismantle the safety net while millions stay unemployed and unproductive. In some ways, the true tragedy was not the financial crisis, but the way we handled it. It could have been used to galvanize the populace to make a better future but was instead used to breed resentment and hate for political ends.

What remains politically realistic gets worse every day, but we surely do need people who remind the public that there were (and are) other ways to get the US back on track.

You sidle up to the issue here, but those of us on the outside sure need a lot more explication of why the Obama administration so apparently easily has given up on self-evidently more helpful and intellectually well-grounded economic and social policies. From the outside, it looks as if the know-nothings say “boo” and they cringe.

If they’d even paid any attention to the know-nothings, they’d have noticed that leadership (regardless of direction) can be quite popular, but no .. we get excuses and temporizing where boldness was needed.

Would be very interested in hearing more about why the Obama admin had “no appetite” for WPA-type programs. Best guess – officials were worried about the blow back of Fox News catching a couple WPA employees having a beer in the park…

Thanks for bring up something which I’ve been thinking about for a long time.

You get a degree in something like economics, there’s an assumption you’ve mastered a methodology, you’ve learned a subject matter, and perhaps some history of the subject. You are then something of an authority, entitled to opine on that subject and be taken seriously. Others may, using the methodology of your discipline, disagree with you.

That is what your doing when you write about what you “should” do. When you write about what you “could” do, you are using the prestige of your subject in order to speculate. People with prestigious degrees in prestigious subjects and people of otherwise high status are unable to resist this temptation and do this all the time.

The rest of us then must reading prominent physicists opinions on global warming, rich people’s solutions to the problems of the poor, and economists assuming that only some things are possible.

I see at least two problems with this. The contingent nature of the future makes almost anything possible, so starting with a “could” instead of a “should” means you are almost always going to be wrong. Too many unpredictable things happen. The second problem is that you wind up debasing the expertise that you might have. Many scientists have written about how little respect they have today, citing such things as the rising rates of unvaccinated children as an example of the lack of respect that scientist have today. Perhaps if scientists limited themselves in the public sphere to subjects they are actually good at, people would respect their opinions more.

You did all you could, or at least you say you did. It wasn’t anything near enough. Maybe the administration did do all that it could. The administration and the Democrats now own the new depression and as far as I can tell, it’s going to last for ten years.

A 30-year propaganda campaign created the Tea Party Republicans. They were not born from one mortgage modification. They started as a tiny group of radicals given a megaphone by the Koch Brothers and the DeVos family, and perhaps a few other wealthy family groups. That opposition network, ALEC, the State Policy Network, and perhaps other radical right organizations that I don’t yet know the names of, will oppose anything that will bring a real improvement. Their Supreme Court judges–which your party allowed to be confirmed–have allowed them even greater influence in the Citizens United decision.

So there’s no sense appeasing them: they will try to shoot down anything that might make a real difference.

In the long term the demographics are changing, in the long term most of the financial fallen angels of the conservative movement will die, and their children will find other things to do with their vast ill-gotten wealth. About all we can do that I can see is to teach the truth and begin reforms that will lay the groundwork for new politics in the future. So Paul Krugman is on target: he is teaching. I do not know how he does it, how he keeps on going, day after day, as the developed world slides deeper and deeper into its self-imposed misery.

I am not a young bird. You and Paul Krugman are about my age. I expect we will all be old before we see any substantive positive changes.

Postscript: when a very young Paul Krugman dreamed of being Hari Seldon, I doubt that he considered that Seldon’s vision of a falling empire, and of mitigating the fall, was one of centuries of heartbreak, though one with an ultimately positive outcome. Asimov, who created Seldon, never fully engaged the emotional impact of Seldon’s vision. But heartbreak it was, and all Seldon could do was lessen the harm. There is perhaps some relevance to the current situation, here.

If you rule out anything that requires legislative action and presumably anything that requires Fed action (not making nominations to fill vacancies was a major unforced error) and anything that smacks of moral hazard, and with an administration that adopts the main talking point of the ignorant (govt must tighten its belt), there’s not a lot that’s possible beyond prayer.

Even at this point, it might be possible for Obama to shift the national conversation towards the right direction, but you say there’s no appetite for that. Don’t they realize that jobs and the economy are what wins elections, not some appearance of good process? The Republicans didn’t win in November because the public liked their policies or because Obama failed to convince them he was a reasonable centrist, they won because of the economy and jobs situation and by running to the left of the Democrats on Medicare.

I suppose massive tax cuts for the rich are possible, and maybe something for the middle class and poor, but that’s hardly the best policy, especially as it would no doubt be followed by more deficit hysteria that would lead to program cuts that would reverse any stimulus benefit.

The failure to use the stimulus to start on our energy conservation challenge still eats at me. Instead of a bold, national program we ended up supporting incumbent interests who didn’t want to see their gravy train diluted. Instead of jobs in every town that could have started in weeks with immediate benefits we ended up with mild conservation improvements and almost no jobs. There are literally trillions of dollars of cost effective conservation measures spread around this country that could be paid off via reduced energy bills. Where’s the infrastructure investment bank when we need it?

Want to do something about the mortgage mess without federal action? Chessnuts, my preciouss, chessnuts!

Many states still have an unrestricted power of eminent domain. Eminent domain works on any property; not just real estate. Mortgages are a form of property. All the state has to do is take the mortgage of anybody who 1.) files Chapter 7/13 and 2.) has enough income to pay a mortgage on the NPV of the market value of the house. It restructures the mortgage to meet the income, and sells the mortgage on the secondary market. It should break even on this transaction (after paying just compensation to the servicer), perhaps even making a modest origination fee. The homeowner keeps their house. Moral hazard is mitigated by the bankruptcy filing.

The servicer’s decline of income and the tranche warfare among the holders of this crammed-down mortgage would be delicious.

Not doing mortgage modification because it might reward some dead beat mortgage holders is a red herring. There are plenty of ideas floating around about how to write down the mortgage debt now paralyzing banks without rewarding any deadbeat mortgage holders. One was to write down the underwater mortgage principal to market value but claw back the write down if the house is ultimately sold for a profit. The reason these options weren’t pursued was because banks didn’t want their seconds (home equity loans) written down or to miss out on the foreclosure servicing fee bonanza. Yeah we’d have a lot of under capitalized banks to deal with but guess what, even though they like to claim they are well capitalized, banks lending behavior shows they aren’t. Obama wants to hang on to his banker pals until after the election but he underestimates how popular it would be to deliver some pre-election medicine to the bankers . The longer he lets the mortgage situation fester, the more he puts his 2nd term and more importantly our economy at risk.

“those torpedoes are not pointed at us. They’re pointed at politicians who take them seriously”

And that is precisely the problem. Obama is the president. He has to not only be able to take the heat, but he has to be able to deflect the attacks and turn them into points for his positions. Bill Clinton was expert at this, even without the ace communications team Obama has. We can’t just let Obama off the hook – he chose this job and we have every right to expect him to lead, not offer a host of reasons why “No, I can’t.” We expect him to encounter adverse situations and turn them around.

Regarding the moral hazard on helping underwater homeowners, John Hussman and Luigi Zingale and William Wheaton have independently proposed some form of debt for equity swap. Why haven’t these ideas been more widely discussed?

What an incredibly frustrating column! I can’t think constructively about what we “could” do because I have no idea why we can’t do what we obviously should do. I think it was a terrible mistake not to explain the constraints in this column. I’ve been watching feigned helpless by the Democratic party for over a decade now, and Obama has mostly been more of the same. There is almost never a credible explanation for “why not?”. And, even if you think it’s not going to fly, why not fight for it? Why doesn’t exposing the true obstructionists lead to political advantage?

But that is a major critique of the Obama administration. All the Obama administration talks about is coulds and all of the coulds are assumed rather than proven to exist. Are you sure that the maximum amount of stimulus that was possible was really only $787 billion? No, you are not sure. Why are you not sure? Because Obama never started out from a strong negotiation position.

Is the idea of a negotiating anchor completely foreign to this administration? If you out start out with an initial position that is ambitious, there is more room to negotiate away from it. If you start negotiations at the “realistic outcome” you are going to have to make concessions from there and you are going to end up with a much worse position.

For example, Republicans talk about passing something with absolutely no tax increases. The Obama administration talks about “balance” and the need for at least some tax increases for those on the high end. The likely end result is a package with huge spending cuts that are overwhelming larger in size than any tax increases. Who is likely to do better in this negotiation? Obviously, the side that had the more ambitious anchor as a starting position and tends to make concessions much more hesitantly is the side that will usually do better.

It appears to me that the Obama administration often wants to start right in the middle and negotiate to the right from there. That is not a good strategy to get a good end result and it also hurts the Obama administration with its base.

I will say another thing. This sudden concern over “moral hazard” with respect to mortgage modifications makes me sick. What about the moral hazard of bailing out the banks or GM and Chrysler?!? You really think that helping homeowners is going to hurt you compared to approving the bailout of the banks and car companies?? If anything, you have hurt yourself by bailing out the banks and car companies at the same time doing too little to help homeowners! Oh, so there is plenty of political capital to help the banks and help the car companies, but not for the “little guy”? What Obama should have pushed for is to allow cramdowns on primary residences in bankruptcy and also have given the HAMP program, which has mostly been a massive failure, actual teeth. Once again, there is a lack of leadership here that is disturbing.

As far as the Tea Party excuse, are you really going to let CNBC personality Rick Santelli dictate policy here? So, it is some CNBC personality that defines “could” for the administration?? No wonder the Obama administration is having problems with his base. If the administration is going to be pushed around by a CNBC television personality, that is just sad. What I think you have here is an administration overreacting to news cycles. You know what is really going to hurt you? Failure to do more on the economy! You know what else is really going to hurt you? Appearance of failure to try to do more on the economy!

Guess what. The people who would be “so angry” about helping homeowners were already “so angry” about bailing out the banks. What you have done by not helping homeowners but helping banks is make the administration looks like it favors its friends on Wall Street over Main Street. You have made people, including conservatives, more angry when you end up helping the “big guys” while offering only ineffective programs like HAMP to the “little guys.” What a dumb move. Especially in light of the fact that as long as we drag out the mortgage problems in this country, the longer we drag out economic problems (I want to say “recession” because with unemployment so high, it still feels like a recession.)

Another thing. The White House has a smart political team, no doubt. But no one knows for sure what is a “could” and what is a “should.” A little humility is in order here. Don’t tell me you are only going to try for “realistic policies” as if you know exactly what they are! That is not true. If Obama uses his bully pulpit correctly (something he has failed at quite miserably) then the unknown universe of “coulds” and “shoulds” can and will shift.

Look. I appreciate this administration’s many accomplishments. I appreciate the Affordable Care Act. I appreciate the creation of the new Consumer Financial Protection Bureau. I appreciate the improvements to student loans the administration has made. I recognize that the administration has had some successes along with its failures (like HAMP, like the too-small stimulus, like the unnecessary federal pay freeze, etc).

But, I also believe it would have been possible to be even more successful. Where was the administration on the issue of filibusters in the Senate? Why wasn’t there advocacy from the administration to change the rules so Mitch McConnell couldn’t obstruct everything? There was no such advocacy. How much would have the “coulds” and “shoulds” have been radically different if there had been filibuster reform??? Here was what I remember. The administration was completely AWOL on this issue. As is the typical pattern.

Another thing. This President ran and was elected as a visionary President. He should keep the tone of a visionary President, not turn into someone who is always going to deliver bad news. What does it mean to be visionary? It means to focus a little more on should. At the end of the day, the base will understand when you have to make a deal that is a little less than the vision. What they wont understand is failure to articulate and push for a vision in the first place. Don’t start and end your rhetoric with only your speculation on “could” (keeping in mind that no one knows the exact boundaries of could and should anyway).

In my opinion, President Obama has been an awful communicator. Where is the vision??? Where is the plan for jobs, that if implemented, could actually work in a major way???

Guess what issue Republicans are going to run on and are already starting to run on. Jobs. They are going to run on jobs. And you know what, President Obama and the Democrats are going to be vulnerable on that issue. Why? Because the President has never presented a visionary policy on jobs.

It should be pretty obvious from a purely political standpoint that, if you can’t actually pass such a policy, one should want to get Republicans on record opposing a bona fide yet politically ambitious policy that could have a major impact on the jobs problem if passed. Then, when they attack you on jobs, you have a good counter-narrative about how they blocked necessary policy on jobs. Also, it keeps your base happy. Also, it fits into the narrative of President Obama as a visionary leader.

How exactly am I, if I am so inclined, supposed to honestly defend the Obama administration on jobs?

“Yeah, you are right. President Obama should have at least proposed and fought for a policy that could have done something on this problem which harms millions of people.” That is the best defense I can honestly come up with!

How exactly am I, if I am so inclined, supposed to honestly defend the Obama administration on mortgages given the administrations failure to try to do anything effective about the mortgage mess, even while bailing out Wall Street.

“Yeah, you are right. It does awfully strange that the administration didn’t do much to help ordinary homeowners even while bailing out well-connected financial companies. Yeah, you are right HAMP was mostly a failure and way too little compared to what was needed. Yeah, you are right, the administration appears to gravitate towards some ideas that aren’t likely to work, but I don’t think they were bought off by Wall Street like you are saying.”

Thank you for giving me so much material to work with! It is awfully hard to defend an administration that does not even try to address these problems in a more visionary way. It is hard to defend an administration that is willing to spend political capital bailing out Wall Street or General Motors, but isn’t willing to spend political capital trying to do more for homeowners struggling in a tough economy. It is hard to defend an administration that consistently fails to put forth an ambitious policy on jobs and appears to be hoping and praying that the invisible hand somehow sorts it out for them.

At the very least, I want the President I voted for in 2008. President Obama ran as a visionary leader, not as a cynical realist who always proposes less ambitious policies because of a grave assurance that anything more just isn’t possible.

This administration has a major communications problem. Much more visionary leadership is needed. I think the President needs to start taking his campaign slogans from 2008 much more seriously. Don’t run as a visionary and then turn into just another cynic.

My complaint about Krugman and many other liberal economists for over a year has been their avoidance of ideas and suggestions of what we ought to do, regardless of what they judge to be politically plausible. First, they are not political scientists, nor are they politicians, nor do they have a right to make assumptions about what Americans with political influence–including voters–can or cannot accomplish. Second, who else is qualified to propose ideas that depart from the old, inadequate (I’m being kind with that word) policies of the past three decades?

I understand the reluctance to go out on a limb, but ideas need to be aired and alternatives discussed. If WPA and CCC are good ideas, make the argument. If you think they are politically not viable, then ALSO propose alternatives, maybe like a major government contracting effort to get firms to hire to do the jobs that a WPA and CCC would do. If you think we need added taxes to make it politically viable, then propose how and where to get the money. Work the issue, don’t ignore or abandon it.

The Tea Party was indeed a reaction to the notion of letting “irresponsible” borrowers off the hook, but the seeds of anger came from letting bankers off the hook. Letting everyone off the hook wasn’t and isn’t seen as a fair solution–wow, what a surprise. Again, don’t ignore the issue, work it, with ideas.

As a (former) administration insider, you’re still looking for someone “outside” the administration (Krugman, etc.) to point us in the direction of what “could” be done? Really?

Perhaps the problem isn’t that there is a lack of “could” ideas. Perhaps the problem is that there is very little “TRY” going on, either. Is it possible that in this political climate the “TRY” has been negotiated away?

MILLIONS are depending upon this Administration – and this president to solve – or TRY to solve the problem of JOBS. We can only imagine that ideas are talked to death before ever getting to the “try it” phase. Sadly, that left all the jobless, homeless, and hungry without.

“There was no appetite for [WPA-type programs] in the Obama admin in the midst of the worst recession since the Great Depression… The reasons for that are interesting and I’ll speak to them another day.”

That’s a promise I hope you fulfill Mr. Bernstein. Because, as I hope you appreciate, this was no ordinary fork in the political road.

Had there been such appetite, most of all on the part of the President himself, it’s entirely possible that what today look like unreachable ‘shoulds’ would have turned out to have been yesterday’s ‘coulds,’ and that the crushingly disappointing history of the last two and half years, very much including the electoral disaster of 2010, would have turned out very differently.

This is a great post, a reminder for us that get too caught up in what is the best plan that the best plan isn’t the best possible now.

Also, yes i do get bummed out when PK is traveling or on vacation. My wife makes fun of me because i’m always telling her what PK says and how he has been right all along since this crisis began. I started reading him in early 2008. been hooked since.

btw Ezra and PK recommend you blog so i will be reading it daily. keep up the good posts.

We need more people that just Paul Krugman telling us what we “should” be doing in the face of high unemployment over the long term. After all, the more voice given to the “should”, the more likely we are to have policy that leans that direction.

The “could” is even more interesting. What “could” our country do if the President were more actively proposing specific solutions? Wouldn’t that narrow the gap of support considerably? When Krugman comes out with a “should” the “could” expands.

It doesn’t take long to see the problem is structural. Not in the economic sense, in the political / media / public opinion sense. The liberals in Congress don’t get on national TV or in national print very often. When a moderate comes out with a liberal-leaning solution, he or she gets ridiculed and dismissed by the pundits and media stars. The President seems to shy away from such criticism so he avoids taking a stand and that makes the situation worse as public opinion solidifies around the urgency to balance the budget versus reduce unemployment.

Apart from your obeisance to PK, your post illustrates how outsiders lose perspective when they become insiders. A few observations:

1.Barack Obama was elected with the largest Democratic majority in both houses of Congress since 1964. Two years later, his party had decisively lost that majority in one house, and almost lost it in the other. Whatever political rationales you use to defend the shortcomings of his policies, they self-evidently failed in their own terms. He was repudiated by a decisive part of the electorate, and his party was defeated. Note that in the first mid-term election during the worst depression in our history (1934) Democrats gained seats. Why? Because the Democrats were led for two years by an eloquent and articulate President, not just an eloquent and articulate candidate for the presidency. Obama needed to do something different in order to win in 2010.

2. Barack Obama immediately adopted a conciliatory attitude toward his opponents. This is true, in part, because he has often emphasized that progress is gradual, though he apparently also considers progress inevitable because. . . well, because right ideas will triumph in the end. Today, we not only see that the triumph of “right ideas” is not inevitable, but that the resurgence of Republicans in Congress it putting Obama’s program in jeopardy, threatening the legacy of the Great Society, the New Deal, and even Progressive regulatory legislation. The outcome of this effort is still in doubt, especially because he is apparently willing to concede ground on every new objection made to formerly pro forma matters: judicial appointments, debt legislation, budget. He will not risk present failure in pursuit of eventual success.

3. Obama’s leadership style is essentially a management style. He keeps a low negotiating profile. His health care bill was dumped into the lap of Congress and members of his own party did not know what was or was not his bottom line. This was even more true of his base. He did not exhort. He did not teach. He negotiated with himself, acting as if his belief in an ideal version of a fair compromise ought to be the starting point for any political negotiation. And then compromising further. This leaderless intra-party squabbling made it easy for opponents to portray the healthcare outcome as a sellout, a burden, an unwieldy compromise that served no one. In attempting to avoid the mistakes of the over-planned Clinton health care debacle, he made all his mistakes in the opposite direction. This included allowing Republicans to drastically limit elements of the bill in committee before they voted against it.

4. His choice of insiders as his sole economic advisors is unforgivable, your role notwithstanding. It was more unforgivable that he allowed Paul Volker to be completely marginalized. The stimulus was initially inadequate and then he allowed a few moderate Republicans to make totally arbitrary cuts as a condition for voting for something they would certainly have had to vote for anyway.

5. Most objectionable of all is his intellectual arrogance toward his base, his notion that “we’ve thought of that” and “we’re not naive.” Yes, he has. He is apparently risk avoidant and power averse. And his reluctance to put what he knows to practical use is his greatest failing as a leader. A failure or two might give him some intellectual humility, and at least provide him with a sense of what the real boundaries of action are. Failure can lay the groundwork for future success if you place blame in the right place, and explain to the electorate why they need you to persevere. For all his talk of transformative politics, he has come to accept politics as usual.

Wonderful comment! The Republicans get so far by always acting like they have a mandate even when they don’t. Obama did so little by failing to act as though he had a mandate or a mission when he did have one. Thus he shrunk the realm of the possible FAR below what was actually possible.

Obama could have done, been, and achieved much more. Agree that if Bernstein thinks not, it’s – very understandably, this is inded something that happens and I do like Bernstein even if I no longer have any use at all for Obama – but yes this is an example of an outsider getting sucked into an insider perspective. You have to TRY and FIGHT, Obama did none of that.

It’s a completely unforgivable failure of leadership that has caused immense human suffering. His “leadership” is pathetic.

I’ve come to believe, though, that Obama never was sincere in his promises, except for a few such as increasing war efforts in Afghanistan and Pakistan. Actions speak louder than words and his actions have shown what he cared about and what he didn’t — rebuilding the infrastructure or creating useful public jobs are not in the category of anything Obama actually cares about and I now think never were. As was remarked, right away his appointment of economic advisors not including Bernstein made his actual sentiments and what he really cared about clear.

And yes on top of that he claims he gave his supporters most of what he promised (when he didn’t) and is full of condescension, arrogance, and resentment toward the folks he didn’t fight for and willingly sold out. I enjoyed the recently reported exchange with Harry Belafonte: “Belafonte replied that his only access to the president has been for a few seconds at a time, not long enough for any substantive discussion. But, he said, at one such event President Obama approached him to inquire when Belafonte and Cornel West were going ‘to cut me some slack.’

“‘What makes you think we haven’t?’ Belafonte replied to the president? At this point the brief encounter was over.”

And then there is the Obama gaffe that particularly gets my dander up – Messrs Bernstein and Krugman will speak for their own scalp conditions.

But my point 5 to add to Krugman’s 4 was the selling out of the Public Option in ACA. Obama could have had this – not should, could.

Instead he threw it away for a meaningless commitment from PhRMA to “save” $80 billion over 10 years in Medicare Part D in return for keeping their Paul Ryan style private lock – along with Big Insurance – on Part D. “Saving” for PhRMA simply meant they wouldn’t raise their prices as much as they were otherwise scheduled to do – and had already preemptively done at the start of Part D in 2006 anyway.

And the White House was actually high fiving itself more for the $150 million in supposedly “positive” advertising it also got from Billy Tauzin from PhRMA than the $80 billion – which they knew was three card monte money to begin with. “Wow” – they told themselves – “We have just guaranteed that PhRMA will not pull a Harry and Louise on ACA the way it did on Hillarycare. We’re such geniuses!”

Leave aside that come late summer 2009 PhRMA was stealthily sponsoring negative ads all over again. The real point is that 30 second spots from PhRMA – or anyone else – going negative on ACA was not where the action was in 2009. The negativity was coming 24/7 from Limbaugh, Fox News, astroturfing organizations, and bogusly hopped up Town Hall Meetings – with no commercial interruptions at all. The White House was up there defending their Maginot Line with the supposed support of PhRMA, while the right wing tanks had already broken through the lines.

Oh, and when did the sellout of this happen? In late summer, early fall, November 2009, after Scott Brown won in Massachusetts in January 2010, in other words, when it was finally necessary for the White House to bow to the politics of could over the politics of should? No, it happened behind closed doors in April-May 2009 when the White House (Obama, Emanuel, Messina, and Daschle, who wasn’t officially on the payroll but was there lobbying for his private clients), together with Max Baucus and Kent Conrad of Senate Finance, sat down with Billy Tauzin to work out this obscene and unnecessary giveaway.

“But,” you say, “Obama didn’t have the votes.”

Yes he did, he had them all along, and didn’t even need the votes of Joe Lieberman, Ben Nelson, or Blanche Lincoln, not to mention Olympia Snowe, Charles Grassley, or Mike Enzi. By the way, Lieberman’s opposition to the Public Option – aka sucking up to the insurance industry in Hartford which was going to be his financial rock if he ran for reelection — only blossomed in the Fall of 2009. Prior to that Lieberman was on board with the Public Option and wouldn’t have dared opposed it if Obama had not frittered away his advantage.

“OK, but that’s only true if you were going to buck the dreaded Mitch McConnell and try to pass ACA under Reconciliation. And that wouldn’t have been …. But wait.”

By the way, Reconciliation was being discussed seriously by Senate Democrats in April 2009. Until the word came down from the White House to lay off that kind of talk which just made Mitch McConnell unhappy. “Don’t worry Max would work it all out with his buddy Charles Grassley” – and their silent partner, Billy Tauzin.

Why do I go over this dreary territory? Well, just imagine if there were a Public Option in ACA. Not coming on stream until 2014, of course, but nonetheless a freight train coming down the tracks.

“Why,” you say, the Republicans and Fox News would be going absolutely ballistic over ACA and lying their fool heads off in an attempt to mislead the American public about ACA. David Brooks would be writing columns promoting a rewriting of the Social Contract and threatening us with fiscal take over by the Chinese if we continued on this path to perdition.”

Oh.

Second, imagine you’ve got a Public Option on the way in ACA, and a guy named Paul Ryan steps up to the plate and takes a big swing at the biggest Public Option of all that is already out there, proposing to replace Medicare with Vouchercare.

Do you think even the PR klutzes at the White House could work with material like that in order to influence the public debate?

And transform in the process a few more shoulds into coulds?

Watch, by the way, for Obama to pull the rug out from underneath the House and Senate Democrats who mistakenly thing there might be some fire in his belly to really stick up for the things he says he believes in rather than go all squishy bipartisan on us again just because Olympia Snowe and Scott Brown didn’t vote for the Ryan budget because they knew they’d be toast if they did.

Yes but what’s the point? To turn your argument around, do you think that some suggestion from you on some moderate, within-the-accepted-political-bounds move that this Administration should pursue to help unemployment is actually going to make any difference whatsoever?

This is what people never seem to understand. Democrats watering down their views and recommendations in the name of political realism has done nothing but backfire. The reason that you speak the truth, that you say right out loud and forcefully what you actually think is the problem and how to solve it, which is exactly what I see Paul Krugman always doing, isn’t because you expect that this will immediately be adopted. Perhaps yours will be seen as the extreme view, and the Obama administration will adopt some view halfway between that and the Republicans.

If you *start* halfway to the Republicans however, then you’ve given up ground to the Republicans before things even start, which is exactly what’s happened over the past few years.

I’m glad that Krugman writes the way he does, so that people knew that what was being done in 2008 and 2009 was inadequate, and they can now see that he was right. If what will avoid a lost decade is more stimulus, do you really think just hiding that fact because “The Republicans will never allow it” is a good move?

Taking on the Republican views by pivoting to only being concerned about “the deficit” was a huge mistake, even politically.

i think you need to speak to the administration’s lack of appetite for a wpa program now if you expect a “could”– how can pk or anyone outside the circle come up with an answer without knowing the parameters involved?

btw, i’ve had my suspicions as to who finds it distasteful and why; i don’t think it’s the gop, but they sure do make a good cover…

What’s missing is some account of why the Obama administration gave up the intellectual fight. Gave up using the bully pulpit to advocate for the policies we actually need to fix the economy, and instead only advocated for exactly what they thought was politically feasible. Which before too long meant advocating for smaller cuts than the Republicans rather than advocating for fiscal expansion at all.

Why didn’t the administration use the bully pulpit to try to build a push from the bottom? That could have moved what was politically feasible, and if it didn’t it would have allowed them to say “this is what we need to do but *they* are blocking it”. Failing to do so also left people without any good explanations of why this was happening, who was responsible, or what could be done about it, so they were prey to the bad explanations being sold by the tea party and other republicans.

All in all, it seems to me it was a horrendously stupid decision, stupid politically and also, to the extent that it failed to get political movement that might have been obtainable, bad for the economy as well (which in turn was stupid politically). What were people thinking???

We could start with the ‘coulda’ by avoiding overdetermination. That’s the fallacy of attributing one cause to something, when anything you can think of has multiple causes.

You write, “…it was precisely this action—giving mortgage relief to someone at risk of default and not to someone who was struggling to keep up their payments—that birthed the Tea Party.”

No. That was a disguise for the resentment that a black man bailed out the banks, which was kinda tolerable though irritating to the Tea Party, and was about to bail out a lot of blacks and Hispanics, which was intolerable. THAT resentment coalesced other causes to spawn the Tea Party.

Note that under the Bush administration many of the problems articulated by the Tea Party were just under way or in full bloom, particularly easy credit for non-white folks, but as easy credit also reached white folks, it was tolerable. ‘Bail out everyone, but don’t bail out only the blacks and Hispanics’ is a theme running through the little discourse one can find from that ‘Party.’ Moreover, the banksters were partying after the bailout and that, too, created resentment. Remarkably, the Koch brothers seem to be credited with marshaling this anger toward Obama, with none too subtle racial undertones.

Recall where Ronald Reagan announced his candidacy for the 1980 Presidential election: his grandstand was Stone Mountain, site of a rock carving done by the sculptor who did Mount Rushmore. That carving is larger than Rushmore and is of Jefferson Davis, Robert E Lee and General Sherman. Stone Mountain holds a dear spot in the heart of conservative, racist Southerners. The KKK has held many rallies there. Reagan telegraphed to the conservative, racist Democrats, the ones who milled about outside the bus terminals where the Freedom Riders were beaten, that he was going to be their representative. That was the borning of the Reagan Democrat. The northern media missed that message, but cannot afford to miss a comparable one sent by the Koch brothers, Dick Armey, another Tea Party organizer, and their ilk: blacks and Hispanics are not welcome. That’s why there is so much joy in the Tea Partiers when Sarah Palin talks about taking back our country – and you fill in ‘from the blacks and Hispanics.’

Don’t overdetermine the reason for the atavistic Republicanism that pervades the land. It is of several toxic sources, but a dominant one is the racism that you seem to casually evade. Call out the Republicans on their racism each time they brandish the theme, fight them on their choice of words about race, and that will begin to deflate the opposition to compromise.

I fall in line with those who say “damn the torpedoes.” Above all, the President needs to be bold, he needs to reclaim the agenda, he needs to make the case directly to the American people. A good start would be an address to the American people — not a joint session of Congress — but direct from the White House to the American people. The topic should be “JOBS,” and the plan should follow the broad outline suggested in Professor Krugman’s May 30 column.

1. We need a massive WPA/CCC program on the order of $1 trillion.
2. We need serious loan modification for underwater and distressed mortgages on primary residences.
3. We need to raise the inflation target as Krugman suggests.
4. We need to reinstate Glass-Stegall, and separate commercial banking from what the retired chief of M&T Bank described in Joe Nocera’s May 30 NY Times column.

There’s been entirely too much “could” and almost no “should” in what is publicly known about the Obama administration’s economic policies (never mind others like torture, GITMO, the public option, on and on…) Obama’s a smart guy as recent presidents go, but he made the mistake of surrounding himself (present blogger excepted) with too many economic Iagos who are playing a double game for their Wall Street banker buddies and the Giant Squid Sucking on the Face of America.

They give him terrible advice. He readily accepts it for reasons he unconsciously reveals in his just-out-law-school book, “Dreams of My Father.” Funny enough (given the GOP-Tea Party criticisms) those reasons can be seen in his own oblique description of what an ineffectual wuss he was as a community organizer. In that job, too, Obama seems always to have focused on the “could” to the near total exclusion of “should.”

If, as seems probable, I wind up holding my nose and reluctantly vote for Obamam a second time in 2012 it will be for only two reasons: (1) the Republicans truly have gone around the bend and now seem incapable of nominating anyone with half a brain and a soul; and (2) I’ll be hoping against hope that Obama throws Robert Rubin and the other Giant Squids overboard and hires Bernstein, Krugman, and their like-minded colleagues to do what’s right.

What’s wrong with doing an end run around the conventional wisdom and proposing something that neither of the two parties has championed in decades?

In the 1932 election campaign BOTH parties stated their support for a shorter workweek as a response to high unemployment.

1932 Republican Party Platform: “We believe in the principle of high wages. We favor the principle of the shorter working week and shorter work day with its application to government as well as to private employment, as rapidly and as constructively as conditions will warrant.”

1932 Democratic Party Platform: “We advocate the spread of employment by a substantial reduction in the hours of labor, the encouragement of the shorter week by applying that principle in government service; we advocate advance planning of public works.”

On April 6, 1933 the Black 30-hour Bill passed the U.S. Senate. According to the memoirs of two prominent New Dealers, Rexford Tugwell and Leon Keyserling, it was passage of the Black Bill and the Roosevelt administration’s fear of business opposition to the bill that gave the impetus for the New Deal programs.

“It will be remembered.” wrote Tugwell, in his New Deal memoir, Roosevelt’s Revolution, “that one of the reasons why NRA was sponsored by Roosevelt, and why the act was passed in the special session of spring, was the threat of a thirty=hour law being pushed by Senator Hugo Black.”

Keyserling concurred. In a letter to Arthur Schlesinger in 1958, he wrote, “The National Recovery Act… would not have included either Section 7(a) or the wage or hour or labor standard provisions. These emerged through a series of haphazard accidents reflecting the desire to get rid of the Black bill and to put something in to satisfy labor…”

To make a long story short, without the dreaded Black Bill there would have been no New Deal. Maybe the “shoulds” are just not radical enough. Maybe folks should be paying more attention to Dean Baker!

The difference between could and should is often courage. I get that there are political realities, but do you all get that something has to shape those realities? And without more like Paul we will always lament the should? Chasing only what we believe we could get done is ultimately a loosing game. Would you tell your children to forget their dreams and focus only on what they think they could achieve? Of course not. We must always strive for our goals–even the ones we deem impossible. To do otherwise is to accept–to acquiesce to–failure. We must find a way to hold up the path to success. This we must do as surely as we must be aware of political realities and plan incrementally.

Right now the public sees two things; the Republican party beliefs and then the administration, and to some extent the Democratic party, following that lead. How are the public to evaluate alternative ideas if the only ones advocating them appear to be shunned by the administration in favor of right-wing “ideas”? That IS the reality that is being avoided here. And that is what must be solved if these ideas are ever to see the light of day. It isn’t as if the POTUS himself must stand in defense of Paul, though that shouldn’t be so easily discounted, but that there must be an effort to do so from somewhere on high.

You’re taking the wrong tack here, Bernstein. I also gave Krugman a homework assignment, but mine is more practical, and it emphasizes the “should’s.”

While I suppose you might squeeze a little blood out of the Republican turnip, you won’t get enough for a transfusion. Instead, President Obama should sell the “should’s” to the American people. He did little to sell the original stimulus package, and the payoff for his failure came in November. (Yeah, I know he was busy, but the stimulus was, as your old boss would say, a Big … Deal.) If he made the effort too sell the American public on a serious jobs creation package, they would buy.

People understand in a visceral way that the American crisis where they live is not the deficit but real people out of work or underemployed. Nancy Pelosi thinks the election should be about Medicare — that is only going to sell to a certain segment of the population. People want jobs now, and they want to hear an understandable government plan to increase the number & quality of U.S. jobs. A huge jobs package — something Republicans would do everything in their power to prevent — is election year gold for Democrats. But they have to stop whispering, or — as they’re doing now — forgetting about it.

If Democrats don’t address the country’s most severe problem early and often, in a way that promises a better near-future, well, they might as well be Republicans.

Without repeating to many cliches about issues that are now done, and decisons that were made, I still remain struck by how stubborningly the Obama White House defended the stimulus (even as reduced from what was originally proposed) as “just right” for turning the economy around even when the economic figures were coming in so much worse in March, April, May, and June of 2009 then what had been predicted. I still don’t understand the defense of that which basically hung the bad economy around your necks and and the necks of the Democrats as opposed to people who should have been held accountable for it (the Republican Party and Wall Street). Economically, it was bad policy (you failed to recognize that this was a Minsky-Fischer recession caused by a asset bubbles and the growth in private sector household debt burdens beyond the limit that it could safely be serviced). It was apparently a short-term political choice to not ask for a second stimulus right away because all the energy and political capital was to be spent on the Affordable Health Care Act. If that was a case, it was a stupid political decision since high unemployment and a slow growing economy always hurts the ins. Further, the credibility AHCA of helping average people was undermined by the neglect and demoralization the working class suffered and led directly to the the 2010 disaster (and if the economy keeps crawling around, don’t be so sure that a Republican won’t be elected next fall on a very right wing platform to reverse 150 years of progressive legislation).

Let’s not forget that the current obstructionist and reactionary atmosphere in Washington is not all the Republicans’ doing. Obama himself maneuvered his administration into the ongoing race to the political bottom, when he both appointed and embraced the egregious Bowles-Simpson commission, and set the stage for a post-2010 political environment dominated by the quack practices of austerity economics and the Peterson camp. Read the first few pages of that commission’s report, and ask how their prescription for America differs in any significant way from the theories of the conservative austerity-mongers who now reign over the US House of Represetatives.

That was Obama’s commission – not a Republican commission. The man who won a resounding electoral victory in 2008 appointed a “bipartisan” commission headed by the most conservative Democrat he could find and a loose-cannon Republican hysteric.

They could have done it by simply offering grants to counties, towns, cities and states for needed local maintenance projects. The Washington Republicans would have been forced to fight their local bases at that point. They made the whole thing too complicated.

Hi Jared, I make less than $50,000 per year. Could you implore President Obama to cut taxes on me again? It’s not a big deal, but it would be pretty sweet. Just kidding. I’m one of those Americans who understands the government needs some of my money to pay for stuff, like the train I ride to work.

This sounds very much the general argument that not much more was politically feasible. To be sure, I understand the torpedoes are headed towards Obama. That is what happens when you are the President.

However, it seems like Jared makes the argument that the medium and long term political situation is unsustainable (I think true), and changes will come. The problem is, given a political vacuum, and no one making arguments for the better correct policy, why do we assume that such policy will blossom out of thin air? The framework must be set forth at some point or it is just not going to happen. A political leader will need to do this. Paul Krugman and others can talk about it, but without proposals coming forward from a politician, what mechanism exists for policy advancement and execution? Also that point in time, if it ever comes, most assuredly will not come at a secure political moment.

Anything can fill a power vacuum, bad policy or good. The Republicans are seeing that, and are offering their policies, but why shouldn’t they? It truly is an opportunity to push an agenda for their very narrow interest group (although it seems like it is backfiring on them–they over reached a bit too much with Medicare).

Krugman is far better as a “should” than a “could” for now. Dems have no equal and opposite in their ranks to counteract the prevailing GOP wisdom. PK does a good job of filling that vacuum by both debunking the assertions of GOP proposals and providing a clear view of current economic problems and solutions backed by data. While the politicos are looking for compromise, we’re getting a dose of reality from Krugman.

The point is looking at what could be done is all well and good if both sides are considering compromise. The GOP is totally in should mode and Dems need to respond in kind. Until they get a little humility back, being in could mode means you’re compromising before the other side has even put a price on the table. Never be the first one to talk price in a negotiation.

“this got me thinking about the relative value of important voices like Paul’s promoting what we should do right now as opposed to what, given political constraints, we could do.”

What strikes me about the economic initiatives of the Administration is where they worked and where they failed. It’s a consistent picture:
1. Initiatives for banks, financials, and the corporations: succeeded.
2. Initiatives for homeowners, workers, and Main Street: failed.

I think this reflects where Obama was willing to spend political capital and not ‘political constraints’. Capital went to cover the hides of the awesomely rich. When it came to ‘the little guy’ there was no political capital left.

I think this reflects who finances campaigns. The fact it does not reflect the will of the people is and will be a source of real political instability.

…you’ll have to do better than -I’ll speak to them (reasons for no WPA stuff) another day. The state of the economy requires one & all to shout at the top of our collective lungs…we want alternative energy as the WPA program. Is it not time to do something for Americans? Some of us are grown ups, Jared, and can handle the gossip…what’s the scoop? Tell us why this is a no brainer.

My money is on Japan to break the stranglehold of big biz on energy delivery. The use of fossil & nuclear require immense capital outlay & infrastructure, not to mention the forward consequences of their hazard & waste. The Japanese have this code about honor & disgrace…the fool me once application of Zen. The Daiichi disaster was their wake up call. Germany just made the move of acceptance on the alternative side. The dominoes are taking shape.

Imagine overhauling the national grid at the local level…underground the utility lines, switch to fiber optic communication & make the grid two way. Since solar & wind are the future, they must be treated as bridge technologies and utilized currently. Nanotech will conquer the sun capture & improve wind turbines. Like the internet, the web of energy sources will feed the grid during the day for industrial/business use. Nightly, we access the grid for personal usage…electric car charging & so on. At the moment, storage is the stumbling block…as are the entrenched interests on the energy side of the equation. Personalized energy creation is not their cup of brew.

This WPA program fixes three problems…underutilized capital of the human & equipment kind, plus fossil fuel consumption. Everybody gets back to work, everybody. The birds & squirrels can go back to the trees when the overhead lines disappear…imagine such a world. The tech is there now to convert the nation. When the Japanese perfect the next gen, we’ll be in the position for a quick switch.

As Husserl would say-you can’t think out of the box when all you know is that thing you define as a box. Is it a box or a jail? Time to turn their power off & ours on.

I’m not sure this “coulds” vs. “shoulds” thing is all that illuminating…but I’ll take the bait nevertheless.

A discussions of the “coulds,” it seems to me, should (ha ha) be behind closed doors, by and large. What should (ok, I’m stopping now) be discussed in public is what the “shoulds” are. This is at the heart of the tragedy now unfolding as the Obama Presidency.

If a WPA program is something we should do, where is the high elected officials arguing for it? There’s no shortage of GOP’ers arguing that we should gut Medicare and Medicaid. But our voices of “should” are fringers, not out mainstream.

The entire Dem machine doesn’t seem to grasp that the party has to stand loud and proud for something. Cutting odious deals because we have no choice is not a platform – it should be a reluctantly accepted result (as the GOP does). That’s why the “coulds” — the art of the possible, say — is something that should be held privately. It basically answers the question of how poor a deal are we willing to accept before we bail. The “shoulds” are our opportunities to educate voters about what we believe in, and to show our commitment to those values. Instead, we have a bunch of “savvier-than-thou” pols who are falling over each other trying to show just how far they are willing to go to allow the GOP to run this country.

If you’re dedicated to attempting bipartisan effort with the Republicans and you start with your “could,” you’re doomed — you’ll be lucky to wind up with half-a-could. As plenty here have pointed out, there’s no shortages of candidates to focus on for moral hazards — you can start with “should” if you’re willing to fight the great framing war. Until the recent speech on the role of government, Obama has seemed to be reluctant to go there. There are certainly non-dry, emotional alternatives to the “tightening our belts” metaphor for responsibilty, but Obama adopted just that image.

I think one of the “coulds” we should be doing is keeping attention in what we should be doing, even if not immediately politically possible. The is the role Dr. Krugman serves so admirably.

It’s only be emphasizing that we aren’t doing nearly enough that we create the possibility of a political environment that allows us, at least, to come a bit closer to enough. This is, IMO, the flaw of the current administration’s thinking and acting. When they take an opening position based on what they think *can* be accomplished and go up against an opposition that is extreme in what it thinks *should* be done they’ve given up half the fight even before the fight begins.

Rule 1 in negotiating – start negotiating from as far to one side of your hoped for solution as you expect the other side to start to the other side. Obama & Co start from where most of think they should and could end up, if they had the foggiest idea of how to negotiate and with whom they are negotiating.

Rule 2 in negotiating – plugging one hole in a levee isn’t worth diddly, when there are two holes in the levee, so don’t compromise by plugging one. That’s critical when deciding on what you can compromise and on what you cannot. When

And the country is paying for that failure – twice over, if the Case-Shiller Index is foreshadowing anything.

The moment for “coulds” passed the day Lehman Brothers collapsed. The cash sent to Wall St. was not described as “coulds” they were described as “shoulds.” Why do you think the average American deserves less?

Everywhere I travel here in Massachusetts, I see bridges red with rust. Yet, late in the Stimulus, we were told by the Obama Administration that shovel-ready jobs weren’t proving as plentiful as originally thought. That appears now to have been a self-serving conclusion unsupported by the facts.

Although Jared Bernstein doesn’t explain why there was “no appetite” for WPA-type progams in the Obama Administration, one can speculate that the President and his advisers were wary of being labeled “socialist” or “European.” They may also have been worried about local corruption. Either issue could come back to haunt them in the re-election campaign.

As much as I decry GOP arrogance, I think Obama and his people were guilty of a hubris of their own, pushing green this and high-speed that, when it was painfully obvious what was needed: labor-intensive road and bridge work, and on a massive scale . A WPA jobs program was needed in 2009, one is needed now, and one will be needed after the election. The voters will soon have an opportunity to speak on this issue, as they have recently done on the Medicare in Buffalo.

The question is, what are the President’s priorities? There’s a famous story of a gruff working man standing, waiting, along the route of FDR’s funeral train. In his hand, he held a home-made sign displaying an obviously heartfelt farewell sentiment. A reporter came up to him and asked, “Did you know the President?” The man answered simply, “No, but he knew me.” Whatever Obama’s strengths as President, and there are many, that will not be his epitaph.

One thing that would help is if the prominent Liberal econ guys – Krugman, R Reich, D Baker, etc, could,even if only once a year, get together and put out a program or something…each seems to be devoted mainly to trumpeting his or her own horn, rather then really, seriously focusing on getting the right stuff done

I echo many of those who have commented here. My disappointment with the Obama Administration has been the failure to *fight* for job creation and a larger economic stimulus.

In my judgment, weak demand has been a drag on the economy and strong fiscal stimulus could help to pick up the slack. A stronger stimulus program would have propelled recovery– and federal purchases could have been made through the private sector rather than through WPA-type programs.

But the Administration never fought for assistance to Main Street. The focus was on TARP administration, TALF and investment purchase program. I don’t necessarily begrudge the massive assistance funneled to the finance sector, but I do decry that the Obama economic team didn’t try nearly as hard to help the unemployed, the underemployed, and small businesses. Had Team Obama fought and lost, my respect would be intact. But standing near the exit with a finger to the wind isn’t the best use of the Presidency.

Assuming Obama wins 2012, the Bush tax cuts may well expire and the budget comes close to back into balance. So from the Republican point of view the goal is to balance the budget while maintaining the tax cuts. Obama too wants to maintain the tax cuts for the first $250,000 of income, which of course gives folks who make more than 250k a cut of about 60k. Since given the current Republican field it’s a good bet that Obama will be in office when these expire, giving him significant bargaining power. He could bargain about the form of the future tax cuts with other compromises.

Capital gains tax doesn’t in my mind do what it purports to, and could be made to do so. For example, a common business strategy these days seems to be to raise stock price by disinvesting and using the extra moeny to buy back stock. This makes a lot of sense when you anticipate a lack of demand, and of course if enough companies do that you have a lack of demand. The argument for capital gains though is that it encourages investment. Suppose that preferential capital gains tax treatment was only available to companies whose US payroll + benefits had increased over the term of the investment. That might well be something that both sides could agree to. There are obviously variants of this notion. One variant is that capital gains goes back to 20% for companies that have not increased payroll since the time the bill passes. That might be an incentive to start investing now, in case people think they might want to hold into 2012.

The imaginary idea that it’s somehow impossible has infected the Obama administration, as you document. Given that, it seems the only thing to do is THROW THE BUMS OUT. Why should we elect people who capitulate without trying to get anything done.

As for “mortgage modification”, if it had been done RIGHT, by protecting people being cheated by the banks, it would not have created moral hazard issues — but Obama refuses to admit the existence of widespread Foreclosure Fraud and Servicer Fee Fraud, as documented at Naked Capitalism.